Mix one part consumer demand, a dash of soil and a few drops
of water. Gently fold in a
complex international marketing system.

That's a recipe for what Georgia cotton farmers and
processors are thinking now.

"Nobody needs to panic about the Georgia and world
cotton situation right
now," said Don Shurley, a cotton economist with the
University of Georgia Extension
Service. "Consumers may find some lower prices or sales on
cotton clothes and items
and growers should look for favorable pricing
opportunities."

Recent reports from the U.S. Department of Agriculture figure
the national crop at 18.6
million bales. Georgia's crop is expected to be 2ÿmillion
bales, just over 10 percent
of the U.S. total.

Based on improving weather across the cotton belt, Shurley
thinks the national crop
could come in at close to 19ÿmillion bales. Standard cotton
bales weigh 480 pounds.

But for the first time since 1990, demand for cotton is
down.

"In the'80s we kept setting consumption records every
year," Shurley said.
But higher retail prices and new fabric blends, among other
things, slowed down cotton
use.

"It'>s
certainly fair to say that as farmer prices rose, retail prices
went up, too," he
said. "But the entire increase didn't go to the farmer.
Because the raw-material cost went up, the cost for
each step it takes to get cotton from the farmer to the store
went up, too."

The cotton in a typical pair of denim jeans weighs about two
and one-third pounds. At
1995 prices of about 73 cents per pound, the farmer got only
about $1.83 for the cotton in
each pair. Labor, shipping, processing and marketing make up the
rest of the retail cost.

For these and other economic reasons, as cotton use went
down, so did processing and
milling orders. That cut the time employees worked. Other mills
closed completely as
processors moved overseas, where labor costs were lower.

Farmers saw the drop in demand and planted less cotton this
year.

"The U.S. doesn't typically import cotton," Shurley
said. But low supplies, due to
high demand in 1994-95, were a part of the formula that
triggered the import of cotton to
the United States.

In 1994, a normal production year in the United States but
poor in other
cotton-producing countries, we imported only 20,000 bales.
"That amount is so small
as to be mathematically unimportant," Shurley said.

But the imported amount jumped to 445,000 bales in 1995. And
projections for 1996 stand
at 400,000 bales.

Rising cotton imports drive prices down further. And deflated
prices, Shurley said,
make it harder for farmers to decide whether to plant cotton or
crops such as corn or
soybeans, which may return higher profits.

Crop prices are cyclical within a season, too, he said. For
cotton farmers, the falling
demand could push the price down into the high-60 cents-per-
pound range. But that fairly
low price, Shurley said, could spark demand and drive the price
back up above 70 cents,
where they are now.

Knowing that, some farmers may choose to contract their
cotton for higher prices later
in the year. The higher price per pound can more than pay for
the cost to store the
cotton.

In any market-driven economy, retail and wholesale prices
follow the law of supply and
demand. "As demand increases, so do prices," Shurley
said. "When supply is
greater, prices drop.

"No matter where in the price cycle we are, somebody
benefits," he said.
"But before long, someone else in the buying chain will
have the advantage."